Neptune Company produces toys and other items for use in beach and resort areas.
ID: 2424863 • Letter: N
Question
Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3.20 per unit. Enough capacity exists in the company’s plant to produce 30,500 units of the toy each month. Variable expenses to manufacture and sell one unit would be $2.02, and fixed expenses associated with the toy would total $53,485 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30,500 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,674 per month. Variable expenses in the rented facility would total $2.24 per unit, due to somewhat less efficient operations than in the main plant.
Required: 1. Compute the monthly break-even point for the new toy in unit sales and in dollar sales. (Round "per unit" to 2 decimal places, intermediate and final answers to the nearest whole number.)
Explanation / Answer
Statement showing computations Particulars Amount Selling price of toy 3.20 Variable expense per unit 2.02 Contirbution per toy = 3.20 - 2.02 1.18 Total Contribution from 30,500 Toys 35,990.00 Fixed Expenses 53,485.00 Loss 17,495.00 i.e. company need to recover 17,495 as well as fixed cost of rented facilities In rented Facilities Selling price of toy 3.20 Variable expense per unit 2.24 Contirbution per toy = 3.20 - 2.24 0.96 Fixed Expenses 2,674.00 Loss required to be covered 17,495.00 Total Cont desired 20,169.00 No of toys = 20,169/.96 21,009.38 BEP in toys = 30500 + 21,009.38 51,509.38 BEP in $ = 51,509.38 *3.20 164,830.00
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